Carne Group, a large European third-party management company, has just surveyed C-suite executives in fund management and institutional investors across Europe, looking at industry ambitions and expectations for the year ahead.

Against a backdrop of growing investor appetite for alternative assets and exchange-traded funds (ETFs), fund managers are predicting big increases in inflows and product launches in 2025, according to new research from the Carne Group. However, growing regulatory complexity and client pressure for higher standards are driving increased outsourcing of non-core functions.

The firm’s annual report into industry ambitions and expectations for the year ahead, Change 2025, surveyed 251 C-suite executives in fund management and 200 institutional investors across Europe, together responsible for more than $4.6 trillion in assets under management.

When questioned on their outlook for fund flows this year, fund managers responded positively, with 81 per cent expecting to see an increase in the flow of new capital into their funds and segregated accounts during 2025, the survey reveals.

Eighty-four per cent expect the number of new funds launching in their sector this year to be higher than in 2024. Moreover, 42 per cent predict this increase to be dramatic, compared with 14 per cent of those surveyed last year, the firm said in a note.

Fund managers believe that demand for private markets will continue to boom in 2025, with hedge funds and private equity being the alternative asset classes expected to see the biggest increases in fundraising this year.

Eighty-four per cent of fund managers also expect the level of fundraising by hedge funds to increase this year, with 57 per cent predicting a dramatic increase, while 72 per cent expect an increase in flows to private equity of 31 per cent – a dramatic increase. The corresponding figures for real estate are 71 per cent and 33 per cent, while for private debt they are 59 per cent and 24 per cent.

The appetite for these asset classes, which provide diversification, downside protection and hedging opportunities, appear to be supported by market conditions, with 83 per cent believing that the level of volatility in stock markets will rise this year, up from 67 per cent of those surveyed last year.

This predicted increase in volatility comes hand-in-hand with a rise in risk appetite. Sixty-nine per cent predict that their organisation’s appetite for risk will be higher this year, with 7 per cent believing that levels will be much higher, the survey shows.

Rise of ETFs contributes to sector growth
Exchange-traded products remain front of mind both for institutional investors and for asset managers seeking to service client demand in 2025. In terms of AuM, three-quarters of the managers surveyed say that ETFs already account for between 10 per cent and 15 per cent of their total assets. Managers expect this proportion to grow over the next five years, which is also in accordance with investor expectations: 82 per cent of institutional investors surveyed agree that investors are moving ETFs from short-term asset allocation strategies to core portfolio holdings. Of these, 17 per cent agree strongly.

Regulation continues to play a critical role in the evolution of the fund management sector: 98 per cent of fund managers and 99 per cent of institutional investors questioned agree that regulatory complexity will increase over the next two years, the survey reveals.

Institutional investors also plan to rely more heavily on external providers this year. More than two-thirds will increase outsourcing in 2025, with 40 per cent expecting a dramatic increase, which is much higher than last year’s 20 per cent. When asked to give the main reasons for increasing outsourcing, institutional investors showed most concern about their ability to meet client requests for higher reporting standards, followed by the growing burden of regulation.

The Change 2025 report is based on two major international surveys commissioned by Carne Group through the market research company Pureprofile in December 2024 and January 2025.

One survey interviewed 200 investors working for pension funds, family offices, wealth managers, insurance and reinsurance asset managers, and consultants to institutional investors and asset managers in the UK, Germany, Switzerland, Italy, France, the Netherlands, Norway, Finland, Denmark, and Sweden, with a total of $2.33 trillion assets under management.

The second survey interviewed 251 senior executives working for fund managers in the UK, the US, Germany, Switzerland, Italy, France, the Netherlands, Norway, Finland, and Denmark, with a total of $2.31 trillion assets under management. The fund management sectors covered include hedge funds, private equity, real estate, infrastructure, private debt, equity, fixed income, and multi asset classes.